Airbus A3XX Case Analysis
March 26th 2013
Launched in 2000, Airbus Integrated Company (AIC) is a French aircraft-manufacturing corporation that assumes all of the Airbus-related activities. Prior to AIC, Airbus Industrie was founded in 1970 through a consortium of the aerospace companies of Germany, France, England, and Spain. In June 2000, the Supervisory Board of the consortium approved an Authorization to Offer (ATO), which granted the sales force permission to begin taking firm orders for the A3XX, a proposed super jumbo jet that would seat from 550 to 990 passengers. With the announcement of the first orders for the A3XX in July 2000, the management level needs to decide whether they should commit to launch the A3XX given the uncertainty of long-term demand, the enormous up-front investment, and the fact that a failed launch could cause a company to exit the industry as in the case of several prominent companies.
The VLA Market
A3XX is under the VLA category which is defined as the very large aircraft with over 500 passengers or carrying more than 80 tons of freight. Boeing Company and Airbus Industrie have formed a duopoly in this market segment. The operation of VLA can bring higher profit margin. However, the initial investment required for launching this kind of aircraft is extremely high, and both companies can be dragged down if fail. Boeing and Airbus have had discrepancy for predicting the future size of the VLA market. They are still unsure how many market shares that Airbus will take over when it enters the VLA segment with its A3XX model.
Airbus Industrie and the A3XX
Airbus Industrie has been profitable over the recently years (Exhibit 1). As the other biggest player in the commercial aircraft manufacturing industry, Boeing has been capturing 60% to 70% of orders and deliveries historically. Airbus, however, has taken more than 50% of aircraft orders for the first time in 1999 (Exhibit 2). More